CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION
‘‘*’’Barcode Area”*”
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08 JANUARY 2019 (a.m.)

FILL IN ALL THE INFORMATION REQUESTED CLEARLY IN CAPITAL LETTERS.

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SUBJECT PRINCIPLES OF ACCOUNTS – Paper 02

PROFICIENCY GENERAL

REGISTRATION NUMBER

SCHOOL/CENTRE NUMBER

NAME OF SCHOOL/CENTRE

CANDIDATE’S FULL NAME (FIRST, MIDDLE, LAST)

‘‘*’’Barcode Area”*”

D D M M Y Y Y Y
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DATE OF BIRTH

SIGNATURE __________________________________________________

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FORM TP 2019028 JANUARY 2019

CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION

PRINCIPLES OF ACCOUNTS

Paper 02 – General Proficiency

3 hours

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. Answer ALL questions in Section I and TWO questions from Section II.

2. Write your answers in the spaces provided in this answer booklet.

3. Do NOT write in the margins.

4. Show ALL working clearly.

5. You may use a silent, non-programmable calculator to answer questions.

6. You are advised to take some time to read through the paper and plan your answers.

7. If you need to rewrite any answer and there is not enough space to do so on the
original page, you must use the extra lined page(s) provided at the back of this
booklet. Remember to draw a line through your original answer.

8. If you use the extra page(s) you MUST write the question number clearly in
the box provided at the top of the extra page(s) and, where relevant, include
the question part beside the answer.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2018 Caribbean Examinations Council

All rights reserved.
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SECTION I

Answer the THREE questions in this section.

Write your answers in the spaces provided in this booklet.

1. Caleb owns a beachwear business. On 1 May 2018 his business’ cash in hand was $425 and the
cash at bank was $1420. During the month of May, the following transactions occurred.

2018 May

2 Cash sales $360

5 Bought $750 worth of inventory, paying by cheque

8 Spent $150 cash for wrapping paper supplies

10 Sold $800 inventory on credit to Janz Company, on credit terms of 2/10, n/30

12 Deposited $500 of the cash on hand into the bank

Issued a cheque to Sand & Surf Inc. in full settlement of amount of $3100
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less a 5% cash discount

18 Received a cheque from Janz Company in full settlement of her account

21 Cash sales, $485

24 Caleb cashed a cheque for his personal use, $200

28 Paid utilities bill, $280 in cash

Required:

(a) Using the table on page 5, prepare the three-column cash book for Caleb for the month
of May 2018. Total, balance and rule the cash book at the end of the month.

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Dis Cash Bank Dis Cash Bank

Date Details Fo Date Details Fo
All’d $ $ Rec'd $ $

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(16 marks)
NOTE: Dis All՚d means Discount Allowed

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Dis Rec՚d means Discount Received
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(b) Give the names of the type of source documents Caleb should use to make the cash book
entries for the transactions which occur on 16 May and 18 May.

16 May ..............................................................................................................................

18 May ..............................................................................................................................
(2 marks)

(c) State ONE item you would expect Caleb to stock as part of his regular inventory.

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(1 mark)

(d) What is the significance of the balance brought down on Caleb’s bank account at 31 May
2018?

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(1 mark)

Total 20 marks

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NOTHING HAS BEEN OMITTED.

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2. The following trial balance was extracted at 30 June 2018 from the books of Zodiac Express Inc.

Dr Cr
$ $
Capital 32 757
Drawings 23 050
Purchases and sales 101 240 174 432
Inventory at 1 July 2017 9 927
Receivables and payables 3 340 5 094
Returns 1 975 1 437
Discounts 322 623
Wages and salaries 31 851
Motor vehicle expenses 1 121
Rent and rates 8 526
Utilities expenses 2 107
Motor vehicle at cost 7 900
Provision for depreciation on motor vehicles 3 480
Shop fittings at cost 5 000
Provision for depreciation on shop fittings 1 100
Cash 645
Bank 21 919
Total 218 923 218 923

Additional information was provided at 30 June 2018 as follows:

1. Closing inventory was valued at $11 017.

2. Utilities expenses outstanding, $225.

3. Rent was prepaid, $75.

4. Depreciation is to be accounted for as follows:

• Motor vehicles at 25% using the reducing balance method

• Shop fittings at 10% using the straight-line method

Required:

(a) Prepare, on pages 9–10, an Income Statement for Zodiac Express Inc., for the year ended
30 June 2018. (14 marks)

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(b) List the names of the five current assets of Zodiac Express Inc.

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(3 marks)

(c) Calculate the present capital of Zodiac Express Inc. at 30 June 2018. Show all working
clearly.

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(3 marks)

Total 20 marks

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3. The following information has been extracted from the books of Frankie and Patto for the year
ended 31 December 2018.

Frankie $140 000

Capital Accounts
Patto $100 000
Frankie $4 800
Drawings for the year
Patto $6 000
Net Profit for the year $70 880

The partnership agreement between Frankie and Patto provides that the following should be
applied:

1 Interest on Capital account balances 10% per annum

2 Interest on Partners’ Drawings 25% per annum
3 Net Profit/(Loss) sharing ratio between Frankie and Patto 2:1 respectively

Required:
(a) Prepare the partnership’s Appropriation Account for the year ended 31 December 2018.
All figures are to be rounded off to the nearest whole number.

(7 marks)
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(b) Prepare the Current Accounts for the partnership at 31 December 2018. Use the columnar
format.

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(5 marks)

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(c) At 31 December 2018 the partners admitted Soso into the partnership. Soso contributed
$100 000 as his capital. It was agreed that any profits or losses realized would henceforth
be shared among partners in proportion to their Capital Account balances.

The Current Account balances of Frankie and Patto were transferred to their Capital
Accounts.

Calculate the new percentages for sharing profits or losses among the three partners in the
partnership. Show all working clearly.

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(7 marks)

(d) State ONE reason why Frankie and Patto would wish to admit Soso into the partnership.

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(1 mark)

Total 20 marks

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NOTHING HAS BEEN OMITTED.

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SECTION II

Answer the TWO questions in this section.

Write your answers in the spaces provided in this booklet.

4. (a) State TWO types of errors which would not be disclosed by a trial balance.

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(2 marks)

ABC Company Limited provides the following data at 31 December 2018.

(i) Bank balance as per bank statement was $7 350 at 31 December.

(ii) Two deposits which were paid into the bank on 29 December were not appearing on the
month-end bank statement. These were as follows:

C. Morris $1 500
B. Henry $ 750

(iii) Two creditors, R. Jones and T. Miles, were paid by cheque during the month of December.
However, these cheques, for the amounts of $550 and $963 respectively, were not shown
on the 31 December bank statement.

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(b) Prepare the Bank Reconciliation Statement at 31 December 2018 for ABC Company
Limited. Show clearly the Cash Book balance as at 31 December 2018.

(6 marks)

(c) Using data extracted from the books of ABC Company Limited at 31 December 2018,
the accountant calculated the following ratios.

(i) Return on capital employed 43%

(ii) Acid test ratio 1.15:1

Explain to management what EACH of the calculations means.

Return on captial employed

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Acid test ratio 1.15:1

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(4 marks)

(d) T. Green is a new employee who started work at the beginning of the month. She complained
to management that her contract stated her gross pay would be $2500 per month. However,
she received $2200 in her bank account.

State ONE reason why T. Green’s take-home pay could be less than the gross pay stated
in her contract.

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(2 marks)

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(e) (i) ABC Company Limited would like to raise additional capital. The company needs
to decide whether to issue shares or debentures.

Explain ONE right or privilege of investors which rises from the issue of either
shares or debentures as a form of capital.

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(2 marks)

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(ii) On 31 December 2018, ABC Company Limited issued 25 000 $1 ordinary shares
which were fully subscribed.

Prepare the journal entry for the issue of these shares at 31 December 2018. Include
a suitable narration.

(4 marks)

Total 20 marks

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NOTHING HAS BEEN OMITTED.

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5. Total Health Solutions is a supplier of health food products. At 31 December 2018 the following
information was extracted from its Statement of Financial Position (Balance Sheet).

TOTAL HEALTH SOLUTIONS

$
NON-CURRENT ASSETS 120 000
Inventory 90 000
Accounts receivables 45 000
Cash 13 000
Total Assets 268 000

CURRENT LIABILITIES
Accounts payables 53 000
Bank overdraft 60 000

FINANCED BY
Capital 60 700
Net income for the year 94 300
Total Liabilities and Capital 268 000

Additional information provided at 31 December 2018 is as follows.

TOTAL HEALTH SOLUTIONS

Opening inventory @ 1 January 2018 $63 000

Purchases for the year $80 000
Revenue for the year $250 000

Required:

(a) Using the information provided for Total Health Solutions, calculate EACH of the following
three ratios. Show all working clearly.

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(i) Current ratio

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(ii) Inventory turnover

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(iii) Acid test ratio:

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(13 marks)

CariHealth Foods is a similar business which also supplies health food products. It provides
its ratios calculated for the year ended 31 December 2018 as follows:

(i) Current ratio 1.09:1

(ii) Inventory turnover 3.68 times
(iii) Acid Test ratio 0.87:1

(b) Compare the ratios you calculated for Total Health Solutions with those provided by
CariHealth Foods above by responding to the following:

(i) Which entity is better able to meet its immediate short-term obligations?
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(1 mark)

(ii) Suggest ONE reason for your answer in (b) (i).

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(1 mark)
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(c) (i) Make ONE recommendation that a business could consider to enable it to
improve on its acid test ratio position.

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(1 mark)

(ii) Name ONE ratio which can be used to assess the profitability of a business.

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(1 mark)

(d) Use the information provided in the Statement of Financial Position for Total Health
Solutions to calculate the operating expenses for the year. Show all working clearly.

(3 marks)

Total 20 marks

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

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EXTRA SPACE

If you use this extra page, you MUST write the question number clearly in the box provided.

Question No.

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 CANDIDATE’S RECEIPT

INSTRUCTIONS TO CANDIDATE:

1. Fill in all the information requested clearly in capital letters.

TEST CODE:
0 1 2 3 9 0 2 0

SUBJECT: PRINCIPLES OF ACCOUNTS – Paper 02

PROFICIENCY: GENERAL

REGISTRATION NUMBER:

FULL NAME: ________________________________________________________________

(BLOCK LETTERS)

Signature: ____________________________________________________________________

Date: ________________________________________________________________________

2. Ensure that this slip is detached by the Supervisor or Invigilator and given to you when you
hand in this booklet.

3. Keep it in a safe place until you have received your results.

INSTRUCTION TO SUPERVISOR/INVIGILATOR:

Sign the declaration below, detach this slip and hand it to the candidate as his/her receipt for this booklet
collected by you.

I hereby acknowledge receipt of the candidate’s booklet for the examination stated above.

Signature: _____________________________
Supervisor/Invigilator

Date: _________________________________